A Risky Business

Global warming just got personal. Our neighbor is moving because of global warming. As the world warms, small degrees of temperature change bring changes in the weather. Ice caps melt, seas rise, weather patterns become less predictable, storms become more destructive, and coastal peoples and properties are endangered. In the Washington, D.C., region, studies by The Washington Post and others issue dire warnings. Should a Category 1 hurricane move up the Potomac River toward Washington, the eastern and southern areas would be devastated. As in New Orleans, the poor would be especially affected.

Although we live along the Chesapeake Bay, our neighborhood is safeguarded from the water by such a high elevation that we are not on a flood plain or required to get flood insurance. People have lived on this high, dry spot for nearly 400 years. Still, we see the effects of climate change every day: shoreline and beach erosion, flooding in neighboring low-lying areas, lower numbers of Merganser ducks and even the Baltimore oriole. Our neighbor is near retirement and doesn’t want to worry about these wet and wild scenarios. She would rather move to the West, where she will face increased droughts and fires from global warming.

She may find selling her home more difficult than she imagined. Allstate recently announced it will not offer homeowners’ and property insurance in 12 counties along the Chesapeake Bay, in New York City and surrounding areas, in New Jersey, Delaware and Connecticut. They have already stopped selling new insurance policies in Florida and parts of California, Louisiana and Mississippi. They are also refusing to renew many existing policies in those areas.

Insurance coverage is required to get or keep a home mortgage or to operate a business. As big insurance companies pull out, smaller ones follow. Rates rise with less competition among the few carriers that remain. This hurts the poor most. If all the insurance companies pull out (and the government cannot effectively insure the growing pool), people lose their homes and life savings as properties become virtually unsellable. This is not just an issue in our neighborhood. Fifty-four percent of Americans live within 50 miles of a coast.

Many are angry about these insurance practices. J. Robert Hunter, director of insurance for the Consumer Federation of America, testified to Congress that the insurance industry engages in price gouging and other unfair, collusive practices, because they have a special exemption from the antitrust laws. Hurricane Katrina gave the industry the rationale to raise rates excessively. People from Maine to Texas experienced double-digit rate increases, while Hurricane Katrina victims languished, receiving slow service or none at all from an industry that has posted record profits. According to Hunter:

Consumers are receiving record low payouts for their premium dollars as insurers reap unprecedented profits...the trend in payouts is sharply down over the last twenty years.... In 2005, even considering Hurricane Katrina and other major hurricanes, the industry posted a profit of $48.8 billion—a new record. In 2006, with no major hurricane activity...the industry set yet another profit record, estimated to be $68.1 billion.

The Consumer Federation urges Congress to step in to close this legal loophole, protect consumers and allow real competition.

Insurance is the world’s second largest industry, one of the few products people are required by law to buy. As such, others see them as a partner in fighting global warming. The World Wildlife Fund has partnered with Allianz, one of the world’s largest insurance firms, to recommend measures to reduce global warming. Ceres, a coalition of investors and environmental and public interest organizations, has issued a call for immediate action by Congress and businesses on global warming. Signatories range from Chad Holliday, chairman and C.E.O. of DuPont, to Patricia A. Daly, O.P., of the Sisters of St. Dominic of Caldwell, N.J., and the Tri-State Coalition for Responsible Investment. Some insurance companies reward green practices that help combat global warming. Travelers offers significant discounts to customers who drive hybrid cars. Others promote “pay as you drive” car insurance policies that reward customers who drive less with better rates. Fireman’s Fund offers discounts to customers with green, energy efficient buildings.

Profits as well as principles motivate these initiatives. Green practices not only help the planet, they also help insurers lower their risks, lessen claims from weather-related damages and increase the profits they can earn from investments in green technologies. Insurers can move markets, change business and individual behavior and persuade governments, so these activities hold promise. Government, business and individual behaviors have all caused global warming. Changes in all are needed to work toward a solution, on Earth Day and every day. We are all affected, and we are all responsible for the problem. We can run but we cannot hide from climate change.